Delaware News

Delaware may be able to collect tax from outlet mall

Partnership with Sunbury, township could bring in cash from development near I-71

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Berkshire Township and Sunbury officials have offered the city of Delaware a cut of income-tax revenue from a proposed outlet mall in exchange for partnering with them on a Joint Economic Development District.

Delaware City Council heard the proposal at its June 9 meeting but took no action on it.

Under the deal, a JEDD would be created at the site of the proposed Simon/Tanger outlet mall, to be located southeast of the intersection of Interstate 71 and U.S. Route 36/state Route 37.

According to the proposed agreement, the JEDD's board of directors would be able to levy the city of Delaware's 1.85 percent income tax on workers in the district.

Berkshire Township Trustee Bill Holtry said Delaware's involvement in the JEDD would end at administering the income tax and receiving some of the revenue.

"Those are the only services we're asking Delaware city (for), by the way, is to collect the funds, divide the funds up and disperse," he said.

A JEDD differs from a Joint Economic Development Zone, or JEDZ. While a JEDZ requires approval of a township's voters, the JEDD requires only the consent of all property owners within the district and a city or village willing to collect the tax.

Delaware would take 4 percent and the JEDD's board of directors would take 1 percent of the total revenue for costs related to tax collection and administration.

After that 5 percent is distributed, Berkshire Township would receive 60 percent of the remaining tax revenue, while Delaware and Sunbury would each collect 20 percent.

Holtry said the revenue split among the three entities is still negotiable.

According to city estimates, the JEDD could take in $340,000 in income-tax revenue after the outlet mall opens, using payroll numbers provided by Simon/Tanger. Of that $340,000, the city would receive about $78,000, with $13,600 earmarked for administrative costs.

Those numbers are based on an estimated payroll of $18.375 million for 525 full-time equivalent jobs. Simon/Tanger estimated an average worker at the mall would receive a salary of $35,000 -- a number that some council members questioned as unrealistically high.

Berkshire Township and Sunbury officials said the city also could be a partner in Joint Economic Development Districts at future commercial developments directly north and south of the outlet mall. Holtry said that, in addition to the outlet mall, developers plan to add 6 million to 8 million square feet of corporate, office and retail space in the development zone -- more than double the size of Polaris.

Holtry said while the development projections are "all conjecture at this point," the land's proximity to the exit off Interstate 71 in central Delaware County almost certainly will lead to large-scale development at some point in the future.

"This particular exit is a gold mine for as many people and as many entities that can possibly share in it," he said.

Delaware Councilwoman Lisa Keller said she was not sold on the idea of charging the city's income-tax rate to people who don't live or work in the city.

"How do we justify charging this income tax to employees who are working in this area but aren't using any city services?" she asked.

Keller said she also was concerned the JEDD would require hiring additional staff in the city's income-tax division.

Delaware City Manager Tom Homan said while the city will not provide services to the JEDD, it will be affected by the increased traffic and other activity in the area if the development is built.

"It's a regional project which has an impact on (routes) 36/37," he said. "That transportation corridor impacts all of us, and what happens at that interstate directly impacts the city of Delaware."

Asked why Sunbury and the township wanted to involve Delaware in the process, Holtry said the township and village wanted to use the city's higher income-tax rate. Berkshire Township cannot levy an income tax, while Sunbury has a 1 percent income tax.

Holtry said the township and village previously were in talks with Westerville on a similar agreement, but the city walked away before it could be finalized. Westerville has a 2 percent income tax rate.

Sunbury Mayor Tommy Hatfield said instituting the city of Delaware's income-tax rate in the district would help the communities plan for and solve infrastructure issues near the site.

"Sunbury's concerned about, quite frankly, anything being developed out at 36/37 without a plan on how that thoroughfare is going to happen -- how people are going to get on and off the freeway," he said.

Delaware Councilman Andrew Brush said he thought the development would substantially affect people who live and work in Delaware. Still, he said, council should take the time to research the proposal and decide whether it makes sense for the city to be a part of the JEDD.

"I think the real crux here is, more or less, do we as a city council want money for, basically, nothing?" he said.

Holtry said he thinks the municipalities are working under a 70- to 90-day deadline to set up the JEDD before Simon/Tanger might reconsider joining the agreement.

Officials said Simon/Tanger currently is interested in participating in the JEDD because it is a necessary step for setting up a New Community Authority. An NCA can charge businesses within the district fees on a percentage of their profits to go toward infrastructure work and other improvements.

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